NIO Stock Plunges 56% in a Year as AI Sector Faces Profitability Doubts

Over the past year, investors in Chinese electric vehicle company NIO (NYSE:NIO) have faced a harsh reality: its shares have fallen by 55.7%, including dividends. This significant drop, reported by Yahoo Finance, comes at a time when the enthusiasm for the tech sector and artificial intelligence (AI) is also being put to the test by the market.

NIO's Two Stories: What Investors Weighed

In late October 2025, NIO shares were trading at US$7.01. At that time, investors were debating between two sharply different narratives about the company's future. The more optimistic, or 'bullish,' view projected a fair value of US$8.10 per share. This expectation was based on the belief that innovations like battery swaps, software, and proprietary tech could support annual revenue growth of 44.4% and significantly higher margins over time, according to analysis cited by Yahoo Finance.

Conversely, a more cautious view placed fair value at US$6.58. While it anticipated 30.1% annual revenue growth, this perspective was concerned about persistent net losses and heavy reliance on the Chinese market, factors that could still weigh on long-term profitability. The key, analysts noted, was to observe whether the company's net margin moved towards break-even in each financial report.

NIO's Results and the Market's Verdict

NIO's Q2 2026 results showed revenue of CNY 32,136.861 million and a net loss of CNY 721.591 million, as Yahoo Finance reported. Interestingly, the net margin improved from a loss of 27.0% in Q2 2025 to a loss of 2.2% in the same period of 2026. This shift undoubtedly supported the argument that scale and higher margins could reshape the income statement. However, bottom-line profitability, meaning making a profit, was still not achieved, leaving the picture open to interpretation.

Today, NIO shares trade at US$3.21, following that significant 55.7% loss over the past year. The optimistic fair value still sits above the current price, suggesting the market is heavily discounting the business. For any new buyer, the belief is that multi-brand volume, NIO Power partnerships, and tighter spending discipline will translate into durable earnings. The company faces the challenge of converting its investments in large premium SUVs, battery swapping, and smart driving into steady vehicle orders and repeat usage across its NIO, ONVO, and FIREFLY brands, despite cost pressures and competition.

Shifting Winds in the AI Market

NIO's challenging period is part of a broader trend of caution in the tech sector. Last week, the tech-heavy Nasdaq Composite tumbled 4.5%, snapping a four-week winning streak. The S&P 500 also lost nearly 2%, its biggest weekly decline since late June, as reported by CNBC. Hedge funds, in fact, recorded the largest percentage of global tech selling on record, indicating a general shift in sentiment.

The focus of these concerns is squarely on the artificial intelligence sector. Despite the wave of investments and enthusiasm, investors are beginning to question whether these companies will generate the expected profitability. For example, CNBC reported that Anthropic posted Q3 2026 revenue of US$16.8 billion, up from US$11.6 billion in Q2, yet this still raised flags among investors about the pace of growth in the AI build-out. You can read more about expectations for Anthropic and OpenAI here.

Is There an AI Bubble?

Alarms about profitability are not just coming from companies directly tied to AI models. CoreWeave, a cloud infrastructure provider specializing in AI (known as a 'neocloud'), saw its stock plunge over 25% last week, its biggest one-week drop since November 2025, due to debt concerns, according to CNBC. Investors in the corporate bond market have even started to shun CoreWeave, with its credit default swaps reaching distress levels.

Ron Albahary, chief investment officer at LNW, told CNBC that these moves in CoreWeave's spreads signal a change in the narrative that the AI trade was 'insulated' from rising interest rates. He predicts that if earnings growth moderates, the market could become